China/Asia TMT

Shawn Yang

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Equity Bottom-Up

Innovent Biologics Inc / Equity Bottom-Up

<ul>
<li>Innovent reported C2H22 top line 13% below our estimate and 4.5% below consensus. Operating/net losses missed our expectation slightly, thanks to better gross margin, OPEX cutting and FX gain; </li>
<li>With biosimilars and license-in drugs contributing ~60% of total revenues, Innovent is effectively becoming a channel company. </li>
<li>We acknowledge it has a comprehensive pipeline, but stress that it is only in quantity not in quality; We maintain our SELL rating and cut TP by HK$1 to HK$24.</li>
</ul>


Innovent reported C2H22 top line 13% below our estimate and 4.5% below consensus. Operating/net losses missed our expectation slightly, thanks to better gross margin, OPEX cutting and FX gain; 
With biosimilars and license-in drugs contributing ~60% of total revenues, Innovent is effectively becoming a channel company. 
We acknowledge it has a comprehensive pipeline, but stress that it is only in quantity not in quality; We maintain our SELL rating and cut TP by HK$1 to HK$24.


[Innovent Biologics (1801 HK) Target Price Change]: Biotech Cannot Shun Itself Away from R&D Risks

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

<ul>
<li>Akeso achieved outstanding product sales last year, mainly due to off-label prescriptions.It means Akeso has "overdrawn" AK104's performance on other indications in advance. Sales could significantly slow down over time.</li>
<li>It is difficult to turn loss into profit by selling drugs alone. As the profits from selling drugs are far lower than R&amp;D expenditures, losses are the norm.</li>
<li>Akeso is overvalued, but if AK112 is successful in head-to-head trial with Keytruda, Akeso would be a player to compete on international stage. Its valuation would reach a new level.</li>
</ul>


Akeso achieved outstanding product sales last year, mainly due to off-label prescriptions.It means Akeso has "overdrawn" AK104's performance on other indications in advance. Sales could significantly slow down over time.
It is difficult to turn loss into profit by selling drugs alone. As the profits from selling drugs are far lower than R&amp;D expenditures, losses are the norm.
Akeso is overvalued, but if AK112 is successful in head-to-head trial with Keytruda, Akeso would be a player to compete on international stage. Its valuation would reach a new level.


Akeso Biopharma (9926.HK) - Behind the Outstanding Performance in 2022 and the Potential Challenges

<ul>
<li>There’s no need to imagine that biotech can cover each hospital department/each field comprehensively just like Innovent/BeiGene has done in PD-1 era, which is the dividend of a special era.</li>
<li>When PD-1 sales are gradually approaching the ceiling, the extra or fewer several hundred million yuan of PD-1 sold by Innovent wouldn’t have a fundamental impact on its market value.</li>
<li>IBI362 would be a product at billions level,which means revenue would be doubled. It takes time for Innovent to turn losses into profits,but sales forecast of RMB10 billion is achievable.</li>
</ul>


There’s no need to imagine that biotech can cover each hospital department/each field comprehensively just like Innovent/BeiGene has done in PD-1 era, which is the dividend of a special era.
When PD-1 sales are gradually approaching the ceiling, the extra or fewer several hundred million yuan of PD-1 sold by Innovent wouldn’t have a fundamental impact on its market value.
IBI362 would be a product at billions level,which means revenue would be doubled. It takes time for Innovent to turn losses into profits,but sales forecast of RMB10 billion is achievable.


Innovent Biologics (1801.HK) - Time to Enter the Next Stage After the Dividend of Special Era Ends

<ul>
<li>It’s “a wise decision” to out-license CMG901 and receive cashflow in advance so as to focus on more important late-stage products.Keymed’s management is as pragmatic as ever in strategic choices.</li>
<li>Biotech would find it difficult to promote products by themselves and has to cooperate with Big Pharma to open domestic/foreign markets. But many investors are still “living in the illusion”.</li>
<li>There would be more BD deals in the future. Our view on Keymed's valuation remains unchanged - Market cap about RMB8 billion to RMB1.6 billion is the reasonable range. </li>
</ul>


It’s “a wise decision” to out-license CMG901 and receive cashflow in advance so as to focus on more important late-stage products.Keymed’s management is as pragmatic as ever in strategic choices.
Biotech would find it difficult to promote products by themselves and has to cooperate with Big Pharma to open domestic/foreign markets. But many investors are still “living in the illusion”.
There would be more BD deals in the future. Our view on Keymed's valuation remains unchanged - Market cap about RMB8 billion to RMB1.6 billion is the reasonable range. 


Keymed Biosciences (2162.HK) - The $1.2B Deal with AstraZeneca for ADC and the Logic Behind

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>The MSCI EM vs.EAFE ratio (local currency) shows EM has outperformed relative to EAFE since the DXY peaked in November 2022, and also shows signs of reversing the 2-year downtrend.</li>
<li>As long as the DXY remains below $103.50-$106, we expect outperformance from EM to continue.</li>
<li>China/Hong Kong, Greece, South Africa, and Mexico stand out as attractive countries. Our top actionable Sectors include Communications, Consumer Discretionary, and Technology. We highlight 76 attractive EM stocks.</li>
</ul>


The MSCI EM vs.EAFE ratio (local currency) shows EM has outperformed relative to EAFE since the DXY peaked in November 2022, and also shows signs of reversing the 2-year downtrend.
As long as the DXY remains below $103.50-$106, we expect outperformance from EM to continue.
China/Hong Kong, Greece, South Africa, and Mexico stand out as attractive countries. Our top actionable Sectors include Communications, Consumer Discretionary, and Technology. We highlight 76 attractive EM stocks.


EM Outperformance to Continue (Vs. EAFE) -- Add on a Pullback; DXY Needs to Hold Below $106

China

Innovent Biologics, Inc. operates as a biopharmaceutical company. The Company develops, manufactures, and distributes monoclonal antibody drug candidates for the treatment of oncology, ophthalmology, autoimmune, cardiovascular, and other diseases. Innovent Biologics serves customers in China.

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Innovent Biologics Inc (1801 HK)

[Innovent Biologics (1801 HK) Target Price Change]: Biotech Cannot Shun Itself Away from R&D Risks

We acknowledge it has a comprehensive pipeline, but stress that it is only in quantity not in quality; We maintain our SELL rating and cut TP by...

Blue Lotus Research Institute

Akeso Biopharma (9926.HK) - Behind the Outstanding Performance in 2022 and the Potential Challenges

Akeso's strong sales were driven by off-label use, and sales growth could significantly slow down over time. Due to high R&D expense, it's hard to...

Xinyao (Criss) Wang

Innovent Biologics (1801.HK) - Time to Enter the Next Stage After the Dividend of Special Era Ends

Innovent successfully caught the biggest/most precious PD-1 opportunity, but its sales are slowing down. We think sales forecast of RMB10 billion...

Xinyao (Criss) Wang

Keymed Biosciences (2162.HK) - The $1.2B Deal with AstraZeneca for ADC and the Logic Behind

It’s wise decision for Keymed to out-license CMG901 and receive cashflow in advance due to uncertainties.Biotech has to rely on Big Pharma in post...

Xinyao (Criss) Wang

EM Outperformance to Continue (Vs. EAFE) -- Add on a Pullback; DXY Needs to Hold Below $106

EM vs. EAFE ratio (local currency) shows EM has outperformed relative to EAFE since the $DXY peaked in November 2022. If the DXY remains below...

Vermilion Research

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